Steel market in China has been bench marker for global market. After the mid summer economic trauma of 2011 wherein the domestic market was brought down on knuckles .Ironically this time around it was turn of global economic headwinds tighten the noose on the Chinese steel market. The devastation of US downgrading and EU crisis numbed the dragon in H2. The unnerving impact on the fuming Chinese mills coerced them into production pruning.

With the onset of Chinese New Year (1st February) industry yearned to put the gloom behind and kick start spring revival. However the malignant economic crisis prolonged the tragedy with price and production sputtering. Burgeoning inventory and slip sod European market did not provide sneaking space to the market.

Eventually borne out of desperation it was the turn of reluctant government to catalyze with reduction of CRR. Inflation having been reined at a palpable 3.2% the half measure provided limited respite.

However optimism is gradually trickling in March with expectation of demand picking up during summer. With recession on the wane in USA and crisis ebbing in EU with Greek bail out dynamics are getting aligned for revival. Mills have shown production revival with daily steel production clocking a healthy 1.9 million tonne per day towards the end of February after commencing on a somber 1.69 million tonnes per day.

Even at this juncture caution is advisable as the government in the recent NPC meeting enunciated a realistic growth target of merely 8% in 2012 targeting balanced growth without the speculative pockets. Possible relaxation of monetary policy in the nick of time is anticipated but treading carefully lest the effervescent property market flares into skewed growth with diabolical inflation culminating in unrest amongst disparate populace.

But China Iron & Steel Association in a monthly report published on its website said “China's social housing construction is still facing financial constraints, therefore, support for real steel demand remains uncertain. The government will continue to curb commercial housing, so construction steel demand growth will not be large in 2012.”

CISA said “China's current steel capacity utilization rate remains relatively low, but production has climbed slightly. Once steel prices continue to rise, capacity utilization will accelerate, which will restrain steel price rises.”

The Chinese Long Product Price Index CLPPI has gone up by 98 points last week whereas the Chinese Flat Products Index CFPPI has also gone up by 43 points. The overall price index CHISPI inclined by 67 points.